Wednesday, July 13, 2016

CalPERS fail

CalPERS’ investment portfolio barely eked out a profit during the 2014-15 fiscal year and it performed even more poorly during the 2015-16 cycle that ended June 30, declining by $8 billion (2.6 percent) to $293.7 billion.

Thus, CalPERS is falling extremely short of its earnings benchmark, known as the discount rate, of 7.5 percent per year, and its average earnings over the last two decades are now under that level.

It also means the fund is scarcely 70 percent of fully covering liabilities, even at 7.5 percent, and therefore under the 80 percent deemed to be minimally sufficient,

The timing for flat earnings couldn’t be worse. CalPERS is seeing pension outlays rise as baby boomer workers retire in large numbers and claim benefits that politicians irresponsibly increased during a brief period of high earnings. Moreover, the projected lifespan of retirees continues to increase, which means even more outlays.

[...]

CalPERS has been demanding hundreds of millions of dollars in additional contributions from state and local governments – hitting cities particularly hard – to offset rising outlays while hoping that the mild pension reforms instituted by Gov. Jerry Brown and the Legislature will have a moderating effect in the long run.

11 comments:

Part of the problem, as has been pointed out by EU, is adding so many additional employees. When we became a city in 1986, the city hired 116 employees (this number does not include fire or sheriff). Today we have over 200 employees (again, not counting fire or sheriff). We do pay the fire pensions, but we contract with the Sheriff and don't pay their pensions. Do we need that many employees? I'm not really sure. For example, the City recently hired a part time person to oversee things having to so with short term rentals of homes by owners in Encinitas. I'm not quite sure what this person does, but she is there 3 days a week from 10-2. It's time to take a harder look at how many what all of these employees are doing. We may need them, I really don't know. But each of the full time employees will receive a pension from the CIty if they stay long enough. I know the former Parks and Rec. Parks supervisor, John Frenken, retired as soon as he could during the time Lisa Rudloff took over. He admitted he would have stayed on longer, but her dictatorial style was too much. Karen did let her go, but I have no idea if she gets a pension for working here. I guess another CPRA request could find out. So, even though the City says it is in good financial shape (enough to purchase trophy projects in fact) I wonder how the City gets around the CALPers situation. If you don't know, CalPers stands for California Public Employees Retirement System if I am not mistaken. Is this put on a different ledger than City expenses? Again, I don't know. I wonder if anyone else does?

Why tell me about it, tell Muir and his firefighting cronies and all the over paid over pensioned yahoos at city hall... Btw, 150 working Californians will leave the state today and tomorrow and the next day....Can you say financial Armageddon?? Thanks Grey Davis, Jerry Brown, Arnold!!!

The unscrupulous looting of public funds is accomplished by a system with no checks and balances. These employees don't do anything special, but are given benefits and pensions in increasingly excessive fashion. Muir sat around for 30n years and gets $190K/yr for life? The City Managers and other Admin staff get even more. The Ship of State has been torpedoed.

The result, at least in the short term and assuming no radical pension reform, is more pressure on the city to generate more revenue. That means more, higher value buildings for increased property tax revenue and more people for increased sales tax revenue.

Hence, the high-density, mixed-use, market-rate housing/commercial of the HEU is top priority for the city.

In the private sector, the circumstances would demand cost-cutting moves, which usually includes laying people off. That's not likely to happen in the public sector. The culture is too deeply entrenched.

That's what I've been tell you for months now. BTW, Caltrans has 10,000 workers the average salary for those 10,000 is $175,000 per year. That's why the state is increasing the gas tax and will incorporate a mileage tax.

What is surprising to me is that CalPERS still uses a 7.50% discount rate! With the ten-year note at 1.50% and the long term RoR in equities at 6.58% (both of these numbers before any investment costs), how does one arrive at 7.50% as a reasonable rate of return? No way is that happening...